Submission: Managing exotic afforestation incentives

Dr Eric Crampton
22 April, 2022

This submission is in response to the Ministry for the Environment and Ministry for Primary Industry’s Discussion Document Managing exotic afforestation incentives.

The Document proposes not awarding carbon credits through the ETS for permanent exotic forestry planting, despite the carbon sequestered in such forests, because of other perceived problems resulting from exotic forestry planting.

In summary, we submit:

  • The ETS is and should remain focused on driving reductions in net emissions, in line with the requirements of the Zero Carbon Act.

  • Additional policy objectives, whether achieving biodiversity goals or mitigating effects of local land-use changes, require additional and separate instruments.

  • Attempting to shoehorn additional objectives into the ETS by tweaking ETS settings risks worsening the ETS’s performance in reducing net emissions while providing suboptimal responses to additional identified policy problems.

  • Substantially changing or removing the ‘permanent post-1989 forest category’ only two years after it was introduced worsens New Zealand’s reputation as a safe place to do business. If policy regimes change this quickly and with this little justification, investors will demand a higher risk premium for investing here, further increasing the cost of capital in a capital-shallow country.

  • Better solutions to the identified policy problems are available, pose less risk to the ETS and to New Zealand’s institutional credibility, and stand a better chance of improving outcomes.

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